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Alternative to Raising Tax Rates & Controlling Government Spending

Governments around the world are scrambling to find new revenues sources by imposing new taxes or raising existing tax rates.

Citizens should resist this. A study by Christina & David Romer to examine the impact of changes in taxes for reasons other than to respond to conditions in the economy concluded that: “Our results indicate that tax changes have very large effects on output. Our baseline specification implies that an exogenous tax increase of 1% of GDP lowers real GDP by almost 3%.” (emphasis added here)

Before any new tax revenues are collected, governments should prove they can reduce corruption & waste while also reviewing whether the services they provide are really essential.

As for collecting additional revenues, other alternatives exist.

One way is to privatize ALL government properties & assets whether land or buildings used by any government organ, agency or ministry, but perhaps, not monuments. Those assets that are not sold off should be managed by a private company to insure that they cover operating costs, if not capital costs.

In turn, ALL government agencies or ministries at ALL levels, including federal, state & local governments would pay market rents to use buildings & property out of their budgets.

This will lead to more rational use of land & other resources by government. Imagine how much less land the military would require if it paid market value of land where bases are situated.

As it is, many government offices are situated on valuable real estate that consumes taxes, instead of generating taxable income. Since many government services that once required face-to-face encounters are & be conducted on-line, these offices can be moved out of city centers. And they almost certainly would be if the agency using the space was paying market rents.

Most obviously, the privatization process would generate substantial one-time revenues. Additionally, transferring these assets into private hands would also create a continual flow of additional revenues from property taxes & income earned from using the assets.

According to the Economic Research Service of the USDA, of 2.3 billion that comprise the USA land area, the federal government owns 635 million of them. In addition, state and local governments own 195,000,000 acres of land.

The FY2012 Budget of the US put the value of all federal lands in 2010 at $408 billion. This includes National Parks, National Forests & National Wildlife Refuges.

The Bureau of Land Management manages about 245 million acres & has responsibilities for about 700 million acres of sub-surface mineral estate beneath Federal & non-Federal lands. It also manages 58 million acres of mineral estate beneath surface lands owned by non-Federal entities such as States and private landowners.

From an economic standpoint, transferring these assets out of the hands of government officials will change the incentives for their use. Once these assets are in private hands, the owners or managers will be accountable for assigning them to their highest & best use.

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Content of "Natural Order" attempts to reflect the commitment of Universidad Francisco Marroquin to support the development of a society of free & responsible individuals. The principal commentator for this blog is Christopher Lingle.